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Barbara Farfan

Best Buy Bought Its Troubles in April, 2009 - Store Closings and Openings Won't Fix the Customer Satisfaction Best Buy Killed In Their Own Category (BBY, AAPL)

By March 30, 2012

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When former category killer Best Buy (BBY) announced this week that it would be closing 50 of its big box stores, the usual "market conditions" excuses were cited... online competition, industry declines, promotional activities, price conscious consumers... you know, the usual picks from the inventory of convenient underperformance excuses. But there was no mention by Best Buy leaders, or post-earnings news reports that Best Buy launched its own downward trajectory in April, 2009 when it adopted an ill-advised Circuit City-esque employee strategy. Unfortunately, 50 store closings, 100 stores openings, and a "connected" store format changes won't be enough to revive the customer satisfaction that the Best Buy management team killed in 2009.

In the heyday of category killers, if you built it, customers would come. What Best Buy forgot somewhere along the way is that after they come, you've got to know how to keep them there.

The appeal of online shopping - where the store hours are 24/7, refreshments are provided, and there's no winding checkout queue past the candy shelves - is not news. But online shopping is not a valid excuse for troubled brick-and-mortar retailing either. If the in-person retail experience was more, or at least equally appealing, then brick-and-mortar stores would not be losing out to online shopping. With a customer experience that is at least equal to the online experience, brick-and-mortar stores have the advantage because they have instant gratification on their side.

On the surface, Best Buy seemingly is waking up to this. If we believe what Best Buy executives said in their earnings press release this week, part of their turnaround strategy is to re-create customer satisfaction with more product-interactivity and more employee engagement. To facilitate this new-old approach to customer satisfaction, the Best Buy employees will receive training and a new compensation plan. So, from the outside looking in, it seems like Brian Dunn's management team is completing reversing the employee strategies of Brad Anderson's management team in 2009. Good for them.

If employee reengagement is a sincere goal, and not just a superficial initiative to write press releases about, then it is a good move. Unfortunately for Dunn's team, it might still be a good move at a bad time. Three years of interaction with undertrained and underpaid employees leaves a big muddy footprint on the Best Buy brand image. Time will tell if defected customers can imagine themselves participating in the "reimagined" Best Buy experience. Hopefully part of Best Buy's new-old employee training is a huge module on customer service recovery.

And speaking of service recovery... One other thing that Brian Dunn said during the Best Buy earnings teleconference is essential to the Best Buy turnaround. Included in the list of strategies that will result in cost savings for Best Buy is " lower product return and exchange expenses." Hopefully this doesn't mean that Best Buy's return policies are going to become even more customer-unfriendly than they are already in order to save money. Hopefully what it does mean is that Best Buy is going to stop stocking cheap overseas electronic crap that doesn't work, doesn't last, and has to be returned.

Personally I have had a Best Buy gift card and a Best Buy store credit that have been used and re-issued more than once. I can't seem to make a purchase that sticks at Best Buy lately because everything I've purchased there either didn't work, or was found somewhere else for better terms. It's gotten to the point where the only things I feel 100% confident buying from Best Buy now are Apple (AAPL) products.

Fundamentally, Best Buy has to be more concerned about the satisfaction of its customers than its profit margin when making its buying decisions if its going to create any kind of sustainable turnaround. No matter what Best Buy would like its brand name to be associated with, first and foremost, customers expect that what they'll get in Best Buy stores is a "best buy." It doesn't take too many encounters with cheap crap traps before the Best Buy company name has been changed to Worst Buy in the minds of its customers.

So, the big retailing lesson of this decade is the realization about what genuinely kills a category. Obviously, it's not just real estate, quantity of inventory, and product mix variety. What "kills" in the long-term are killer retailing practices that are far superior to your competitors. These days those killer practices are all about customer integration, employee engagement, and sustainable customer satisfaction.

From this point forward, as far as integration, engagement and sustainable satisfaction are concerned, it's kill or be killed for Best Buy.

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Comments

April 5, 2012 at 11:02 am
(1) Ben McMillon says:

Lots of other stores need to learn from this article. I was shopping at Dillard’s this week and had to look for 5 minutes to find someone to ask a question, and then they didn’t care.

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